China’s industrial valves market

THE high growth rate of gross domestic product (GDP) per capita of the country over the past 10 years is a direct implication of the level of industrialization in the region. China’s government provides many subsidies to attract foreign investments, promote industrialization, and create more jobs. Since 2008, companies have been granted RMB 5 million as subsidy to promote establishment of manufacturing facilities in the country.

The high rate of industrialization and expansion of end-user industries such as oil and gas and chemical production have resulted in higher demand for energy. As a result, the power generation sector in China is expanding in order to meet the growing need and this has been a major driver for the increasing demand of industrial valves in power generation application in China.

The BP Energy Outlook has projected China to be the world’s next largest importer of energy, with the current import dependence of 15% rising to 23% by 2035. China’s energy production would rise by 47% while consumption will grow by 60%.

Coal has been a major source for power generation constituting about 60% of the total power generated in China. Coal fired power plants have been the largest end users for industrial valves manufacturers for the power generation industry. However, the promotion of coal as fuel for future power generation is in dispute in numerous regions of the world and also in China. The country is the top carbon dioxide producer worldwide because of significant emissions from coal fired plants. To curb air pollution, the Chinese government has pledged to reduce its reliance on coal and diversify its energy supplies, as a result of which the growth of coal fired plants in China has slowed. This may have an inverse effect on the pinch valves and knife gate valves manufacturers due to lower demand, as plans for new power plants may be shelved.

China’s measure for reducing the dependency on coal is to replace it primarily with natural gas and through nuclear fueled power generation. The country has set the target of achieving 400 bcm (billion cubic meters) of natural gas by 2020 through both shale exploration and import of natural gas from western nations. The most important driver for the power generation market is the prospect of multiple large-scale pipeline projects for transfer of natural gas being carried out. The West-East Gas Pipeline project is a major natural gas transmission program in China. Abundant inflow of natural gas has been planned for the establishment of natural gas fired power plants in the nation. This will generate tremendous growth opportunities for industrial valves in natural gas fired plants in China.

Urbanization is a global Mega Trend that drives the demand for power supply. Nuclear power is economical to accommodate the increasing energy consumption in China. The increase in nuclear power plants is expected to drive the market growth of valves and actuators. Numerous nuclear power projects are in the planning phase or under construction. China currently has 26 operating reactors generating about 23,144 MWe (megawatt electric), which is hardly 2.5% of the country’s energy demand. The country is planning to transform itself into the next greatest nuclear power of the world with anticipated 83% of the future additional reactors being established in China by 2030. With the growing level of industrialization in China, 68 nuclear reactors are under construction and a staggering 170 reactors are proposed for establishment by 2030. This is a clear indication of the high demand expected over the coming years for industrial valves used for nuclear application in China.

Large-scale automation of the existing power plants is currently underway to increase their productivity and operational efficiency. Increasing penetration of automation in power generation would boost the demand for automated industrial valves. The power generation industry in China is also witnessing a steady trend towards the adoption of renewable energy sources with hydroelectric, solar, and wind power plant capacities expected to reach 350 GWe (gigawatt electric), 200 GWe, and 100 GWe, respectively, by 2020.  This would result in further enhancing the demand for industrial valves with greenfield hydroelectric projects.

Market Analysis

China is the second biggest consumer of industrial valves just after the United States, with power generation being the second largest industry for the industrial valves market in China. In 2014, this industry accounted for 22.3% of the Chinese industrial valves and actuators market.

The revenue generated by power generation industry for the industrial valves and actuators market is expected to experience a CAGR of 9.4% from 2014 to 2020.

There has been significant growth in the number of industrial valve manufacturers in APAC, with China being the major contributor in the region. The industrial valves market in China is highly fragmented with the market share of the top five participants collectively accounting to about 27%. The key global market participants in the industrial valves space have a strong presence in China as a result of mergers with and acquisitions of local market participants. These manufacturing units are equipped to produce valves for sustaining both the internal demand and export to the adjacent Asian countries.

China’s government has been promoting the local valves manufacturers with subsidies and favorable regulations. In addition to the subsidies provided, the local manufacturing companies find it lucrative to manufacture in China also due to the low-cost labor pool, abundant availability of low-cost energy, and presence of highly competitive raw material suppliers. The above-mentioned components facilitate lower product pricing, providing a means to the local manufacturers to compete with the top global ones.

Overall, the industrial valves market in power generation industry of China is witnessing a strong and sustainable growth and has the prospect of several new opportunities and higher demand in the coming years.